The Biggest Pension Scofflaw? Uncle Sam
For many corporate execs, the hypocrisy Uncle Sam continues to display on the subject of pensions must be galling. On Nov. 22, just in time for Thanksgiving, the government issued its annual list of the 50 companies with the worst pension woes. Again, the potential problems of these supposed corporate turkeys seem to have grown worse.
The Pension Benefit Guaranty Corp. says the unfunded liabilities of the worst 50 pension plans grew 31% last year, to $38 billion, of which $31.7 billion is guaranteed by PBGC.
But for all the rhetoric about these corporate scofflaws, there's no mention of the problems in Uncle Sam's own backyard: If the government were forced to adhere to the same accounting standards, retirement programs for civilian and military employees would be underfunded by more than $1 trillion (BW--Aug. 9). What's more, if Uncle Sam were required to reserve for pensions as they are accrued by workers--the way corporations are--the federal budget deficit would be roughly one-third higher.
The problem of underfunded federal pensions will only worsen. Thanks to aging baby boomers within the civil service, the funds needed to cover annual benefit payments by 2010 are expected to nearly triple, to $160 billion.
Where will this money come from? Either Congress must slash the benefits of federal employees--which are more lavish than those of many private plans--raise taxes, cut other programs, or allow the federal deficit to soar further. Cutting benefits and programs is the way to go.
Congress has a more immediate responsibility: to use proper accounting standards, similar to those imposed on the private sector, to reflect accurately the future liability of government pensions. To continue to ignore this potential problem does a disservice to the next generation of taxpayers, who will have to pick up the tab.